Mon, 25th Mar 2019 07:01
25 March 2019
MICROGEN plc ('Microgen' or 'Group')
Microgen plc (LSE: MCGN) is a leading provider of business-critical software and services through its two operating businesses, Aptitude Software and Microgen Financial Systems. On the day of the release of the Group's audited preliminary results for the year ended 31 December 2018 it provides the following strategic update.
Following the change in leadership of Microgen Financial Systems in October 2018 the Board has been exploring a range of strategic options with the objective of delivering maximum value to shareholders.
The Board believes that greater value will be realised through a simpler and more focused business targeted at the specialised financial management software market served by Aptitude Software. The Board has therefore concluded that a demerger of Microgen Financial Systems on to AIM will enhance Microgen plc's ability to allocate capital and management attention on the higher growth Aptitude Software business whilst also providing Microgen Financial Systems with the best ownership environment for it to successfully focus on its specialist target market and service its international customer base.
Historically both businesses benefitted from the combined financial and organisational scale of the Group. Firstly, the Aptitude Software business leveraged the more established corporate credentials of the wider Group when securing new business contracts with prospects for whom the corporate strength of a key supplier is a material consideration. With the growth experienced by Aptitude Software in recent years this benefit has reduced materially as demonstrated by Aptitude Software's 2018 revenue of £52.3 million being significantly ahead of the Group's total revenue in earlier years (for example, in 2013 the Group's revenue was £29.8 million of which Aptitude Software represented £14.7 million). The second key historical benefit from the combined financial and organisational scale of the Group were the operational synergies focused principally on back office administration. In recent years these synergies have largely been reduced as the finance, legal and human resources functions have been embedded into each business unit separately, to provide greater and more tailored support for their growth.
In parallel with the reduction in synergies the Board implemented a number of changes which would facilitate the eventual demerger of Microgen Financial Systems in the future. These changes include the establishment of strong management teams into each of Microgen's two businesses, the separate branding adopted by the Aptitude Software business, the devolution to each business of the back-office administration functions, the recent disposal of the non-core Payments business and finally the signing in 2018 of material multi-year contract extensions with a number of Microgen Financial Systems' Application Management clients. As Microgen Financial Systems makes its final preparations for independence, further investment is now being made focusing on product development, business development and the further strengthening of its management team.
The demerger is subject to shareholder approval and it is expected that the demerged Microgen Financial Systems entity will apply to be admitted to trading on AIM during the course of 2019. It is intended that shareholders of Microgen plc will have a direct shareholding in the demerged entity in proportion to their respective shareholding in Microgen plc. The Board will provide further information on the precise mechanics of the demerger and listing in due course.
Once demerged and admitted to AIM, the newly independent Microgen Financial Systems will become the total focus of its board and shareholders. This focus is expected to facilitate the ability to target acquisitions in Microgen Financial Systems' specialist market space whilst also allowing highly targeted and effective incentive schemes for its dedicated team.
It is expected that Peter Whiting, currently Senior Independent Non-Executive Director of Microgen plc, will chair the Board of the demerged Microgen Financial Systems. Peter's knowledge of the business and extensive public company experience will be a key asset for the business and its executive team. Shortly after demerger it is expected that Peter will step down from the Board of Microgen plc.
Robert Browning, currently leading Microgen Financial Systems' management team in his role of Chief Operating Officer, is expected to be appointed Chief Executive Officer of the demerged business upon admission to AIM. Philip Wood, currently Acting Chief Executive Officer of Microgen Financial Systems in addition to Chief Financial Officer of the Group will continue with Microgen plc in his longstanding role of Chief Financial Officer.
With the Aptitude Software business expected to be the total focus of the Group in the near future, it is now considered appropriate to change the name of Microgen plc to Aptitude Software Group plc. The name change will be effective from early April 2019.
Commenting on the proposed demerger of Microgen Financial Systems, Ivan Martin, Chairman, said:
'The proposed demerger and admission to trading on AIM of Microgen Financial System will represent a significant milestone in the strategic development of the Group. The Board believes the demerger enhances the long-term prospects of both businesses for the benefit of their shareholders, clients and employees. It will simplify the Group allowing the higher growth Aptitude Software business with its specialised financial management software applications to be the sole focus going forwards whilst Microgen Financial Systems looks forward positively to its future as a focused independent software business based on its leading product, Microgen 5Series. The precise mechanics of the demerger and listing will be communicated in due course but is expected to be completed in the current calendar year.'
Ivan Martin, Chairman 020-3880-7100
Philip Wood, Chief Financial Officer
Junya Iwamoto / Henry Reast, Investec 020-7597-5970
Darius Alexander, FTI Consulting 020-3727-1063